Fixed rate mortgages are falling out favour with borrowers as Bank of England base rates remain at all time lows.
Only a quarter (26.3%) of mortgages arranged in October were fixed rate products, which represents the lowest popularity of these mortgages in twelve months.
This is a rapid decline from the situation in June this year when over 80% of all mortgages were fixed, according to the John Charcol Index, which monitors monthly mortgage activity.
The prospect of interest rates remaining at the all time lows is encouraging buyers to select variable rate mortgages rather than become locked into fixed rate deals. Tracker mortgages are currently most popular with house purchasers.
This is a sentiment echoed by Drew Wortherspoon of John Charcol who comments “The Bank of England’s announcement this month of an extension of the Quantitative Easing programme by a further £25bn is another indication that Bank Rate in unlikely to rise in the next few months.”
“Even if longer term fixed rates don’t get much cheaper than those currently available at just under 5%, there seems a good prospect that borrowers on a variable rate will be able to benefit from rates more than 2% lower for the time being and then switch to a similarly priced fixed rate later.”
The October mortgage figures also showed a slight increase in first time buyer activity which is probably due to some mortgage lenders loosening their lending criteria to allow 85% and 90% loan to values.